Study says rice subsidy program punishes poor

MANILA (AFP) – The Philippine government’s mammoth rice subsidy program hurts the poor people it is supposed to helping, according to a study published yesterday.

The report called for reforms to the program, which ate up 2.5 percent of the 2008 gross domestic product and turned the monopoly rice importer National Food Authority (NFA) into the largest loss-making state firm.

The NFA has a mandate to provide low prices of the cereal, provide price support to rice farmers and smooth out price swings mainly by the “untargeted transfer of cheap, mostly imported rice to households” of the world’s biggest rice-importing nation.

But Shikha Jha, of the by the Asian Development Bank (ADB), and Aashish Mehta, of the University of California, found that between 1996 and 2003, Filipinos bought rice at prices that were “almost twice as high” as world prices.

This was because the state barred private rice imports and then the NFA imported “less than that required to maintain the target price, which is set below the world price,” the report found.

While a larger segment of the poor bought subsidized NFA rice than the better off, this was due mainly to the promotion of an “inferior quality of rice” which the wealthier also bought to feed their “domestic helpers and pets,” it added.

NFA rice imports and price subsidies were ramped up significantly this year due to soaring prices, with first-half imports rising nearly four-fold to 858 million dollars, the study said.

The World Bank announced this week that it had lent Manila 200 million dollars to support the government’s increased food subsidy program to the poor amid a global financial crisis.

The study said the 167 billion-peso (3.6 billion-dollar) subsidy program had been a drain on government coffers — it buys rice from local farmers at a nine percent premium to the market price, and sells rice to consumers at prices 18 percent cheaper than commercial rice.

Every dollar of rice subsidy transferred to consumers costs the government about 2.2 dollars, the study estimated, a benefit-cost ratio that it said doubled to 4.4 dollars per dollar of subsidy because of diversion to the regular rice market.

The study found the subsidy was poorly targeted, with Manila receiving about 25 percent, the same as the entire southern region of Mindanao, which has the Philippines’ highest incidence of poverty.

While the NFA subsidy program “is an important safety net in the Philippines,” the study said its actual scope was tiny, reaching “only about 16 percent of the population” in a country where two in five people live on two dollars a day or less.(MindanaoTimes)